Sight Sciences, Inc. Q3 FY2021 Earnings Call

Greetings, and welcome to the Sight Sciences Third Quarter 2021 Earnings Results Conference Call. This call is recorded. It is my pleasure to introduce your host, Philip Taylor from Gilmartin Group. Thank you. You may begin.

Thank you for participating in today's call. Presenting today are Sight Sciences' Co-Founder and Chief Executive Officer, Paul Badawi; Chief Financial Officer, Jesse Selnick; and Chief Commercial Officer, Shawn O'Neil. Earlier today, Sight Sciences released financial results for the three months and nine months ended September 30, 2021. A copy of the press release is available on the company's website at investors.sightsciences.com. I would like to remind everyone that comments made by management today and answers to questions will include forward-looking statements within the meaning of the Federal Securities laws. Those include statements related to Sight Sciences' anticipated financial performance and operating results, market opportunity, the future impact of COVID-19 on operations, business strategy, and plans for developing and marketing new products. Forward-looking statements are based on estimates and assumptions as of today and are neither promises nor guarantees and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied by these statements. A description of some of the risks and uncertainties that could cause actual results to differ materially from those indicated by the forward-looking statements on this call can be found in the Risk Factors section of the Form 10-Q filed today and other filings with the Securities and Exchange Commission. The company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law. For more information, please refer to the forward-looking statement notices and risk factors in the recent SEC filings. I will now turn the call over to Paul.

Thank you, Philip, and thanks to everyone for joining us on our second earnings call as a public company. I'm very excited to update you on our business and share our significant accomplishments across our commercial, clinical, regulatory, and patient access initiatives, as well as our thoughts on the 2022 payment rules released by CMS last week. Jesse will then discuss our third quarter financial results before we open up the call for questions. To start, I will highlight our resilient site team perseverance, and we set new records for quarterly revenue as a company and for our surgical glaucoma segment. Our total revenue increased to 13.1 million, representing growth of 51% compared to the third quarter of last year. We believe we are also one of the very few eye care businesses to report meaningful sequential US growth in Q3 over Q2 2021, despite significant reimbursement noise in surgical glaucoma and the continuing impacts of COVID. Although the third quarter is typically seasonally lower than the second quarter, our surgical glaucoma segment revenue increased to 12.4 million, representing 4% sequential growth from our then record second quarter revenues and growth of 58% versus the third quarter of last year, driven by strong new account growth and increased utilization of our surgical glaucoma product, OMNI. I'd like to remind everyone of the core principles of our company that allow us to persevere and succeed in any operating environment. We focus on the patient first always. We improved the lives of patients suffering from eye diseases by protecting and enhancing their most precious sense, vision. We aim to develop safe and effective products that address the underlying causes of the world's most prevalent eye diseases. Our current commercial products are OMNI and TearCare. Both products are the result of our rigorous product development process, which incorporates four key pillars. First, we master the physiology of a disease to gain a full understanding of the often multifactorial causes. We use this foundational knowledge base to guide our development of solutions that optimize treatment of the underlying causes of the disease. We then apply our iterative design process to develop products that are intuitive for the physicians to use. To pass the final test of our rigorous product development process, we must prove out a viable patient access strategy, either through existing avenues or by pioneering new routes. Leveraging these four pillars, we have created our first two products that have demonstrated improved clinical and real-world outcomes, empowering eye care providers to offer the best care for their patients. Having passed the rigorous test posed by our four-product development pillars, we believe that both OMNI and TearCare are competitively differentiated within their respective eye care markets. This product differentiation is substantiated by the commercial performance, market receptivity, and ECP feedback on both OMNI and TearCare. Our organic innovation and product development model works very well. So expect to hear more from us on the product development front in due course. Over the near and medium term, we will continue to prioritize three key strategic value drivers. Number one, continuing to expand OMNI's adoption and usage by surgeons for adult patients with primary open-angle glaucoma, or POAG, in the established combination cataract segment of the minimally invasive glaucoma surgery, or MIGS, market. Converting this key group of surgeons paves the way for them to perform stand-alone procedures, which brings us to number two, the continued development of the virtually greenfield and substantially larger stand-alone segment of the MIGS market. And number three, seeking an expanded indication for use for TearCare for the application of localized heat therapy in adult patients with evaporative dry eye disease when used in conjunction with manual expression of the meibomian glands, while also advancing market access initiatives, including payer-tailored RCTs that can help create TearCare insurance access to patients whose eye care professionals believe TearCare is appropriate for them. We are pleased with our progress advancing each of these objectives. Our success requires cross-functional collaboration and teamwork through outside sciences, including commercial performance and expansion, the design, execution, and publication of clinical studies, achieving key regulatory milestones, and finally, expanding market access. Our first two goals relate to advancing the treatment of adult patients with POAG. OMNI has been clinically demonstrated to be safe and effective for intraocular pressure reduction for adult patients with POAG. Today, the MIGS market is segmented into procedures performed in combination with cataract surgery, which we refer to as the combination cataract segment and procedures performed on their own, which we refer to as the stand-alone segment. This segmentation is superficial and primarily the result of MIGS bypass stents only being indicated for use in combination cataract procedures. In March of this year, the FDA cleared an expanded indication for use for OMNI that we believe bridges the unnatural divide between combination cataract and stand-alone. This indication for use broadly covers the reduction of intraocular pressure for all adult patients with POAG without limitation with respect to severity of disease, mild, moderate, and advanced or lens status, phakic, which refers to patients who have not had cataract surgery, combination cataract as well as pseudophakic, which refers to patients who have had cataract surgery. We believe this clearance in OMNI's expanded indication represented a significant clarifying step forward in identifying which MIGS procedures are appropriate for certain broad indications rather than as a do no harm add-on to widespread cataract surgeries. This clearance was supported by a substantial body of real-world multi-center clinical data. We continue to invest very aggressively in the clinical and commercial development of OMNI, including further enhancements to OMNI's indication for use, which I will describe in more detail later. We believe that OMNI has two critical physiological and clinical advantages. Number one, OMNI can comprehensively address up to 360 degrees of the disease conventional outflow pathway. Canal implants address a much smaller segment. And number two, OMNI can address all three points of resistance in the conventional outflow pathway, while canal implants cannot. We believe OMNI's differentiated efficacy and indication for use, coupled with our commercial excellence, have driven our best-in-class commercial performance as evidenced by our share gain in combo cataract and market expansion with stand-alone. We've made significant inroads penetrating the adult POAG segment of the MIGS market with our exceptional customer experience initiative, which includes a meticulous surgeon and facility training program. We have already trained a substantial portion of our highest priority customers, the universe of over 3,000 MIGS-trained surgeons. In the third quarter of 2021, approximately 725 facilities ordered OMNI surgical systems, which included very healthy growth in new customers. The most exciting opportunity to expand the usage of OMNI lies in the five times larger stand-alone segment, where surgical intervention decisions rely far more heavily on procedure effectiveness and consistency relative to combination cataract procedures in which we believe the concomitant canal implant procedure is often viewed as a do no harm add-on in the mild patient. To even be considered as the sole reason to take a patient to the operating room, stand-alone MIGS interventions like OMNI must safely deliver a very high consistency and degree of effectiveness. Typically, surgeons first master using OMNI in combination cataract procedures because they have already been trained in that MIGS setting. As surgeons gain confidence in OMNI, we have observed a natural progression toward also using OMNI in stand-alone procedures. In two sequential procedures, OMNI allows surgeons to address up to 360 degrees of the conventional outflow channel, dilating and expanding Schlemm's canal and the collector channels with canaloplasty, followed by unrooting of disease trabecular meshwork during a single surgical session supported by favorable safety data from clinical studies and post-market use. Although our customers and surgeons will largely be the same in both segments, we believe the estimated $5 billion stand-alone segment requires a new go-to-market approach to improve awareness and educate the broader POAG community about the new treatment possibilities enabled by OMNI. This outreach program expands our contact points beyond cataract surgeons and glaucoma specialists to also encompass primary eye care providers who typically first diagnose and treat POAG with medications as well as patients. We are excited to help ophthalmologists, optometrists, and patients better understand the potential advantages of intervention with OMNI. We continue to see significant potential to expand usage of OMNI and are executing a plan to take full advantage of the opportunity that will include targeted expansion of our sales team in 2022 with incremental investments in reps who will focus specifically on office-based clinical education and stand-alone. We also made significant progress advancing clinical trials and augmenting the body of published literature and high-quality peer-reviewed journals that support the safety and efficacy of OMNI for use in future expanded indications for which we are developing the product. In August, we announced the publication of an article in clinical ophthalmology, analyzing 24-month outcomes from a single-center open-label study of the omnisurgical system conducted in Germany. The study reported that use of OMNI to perform a stand-alone MIGS procedure in mild to moderate open-angle glaucoma patients resulted in statistically significant reductions in both IOP and IOP-lowering medication use at 24 months. Mean baseline IOP in the study decreased from 24.6 millimeters mercury preoperatively to 14.9 millimeters mercury at 24 months or approximately a 40% IOP reduction. Mean baseline IOP lowering medication also decreased from 1.9 average medications per patient to 0.5 at month 24, with nearly 60% of eyes free of IOP-lowering medication. Last week, we announced the publication of another article in clinical ophthalmology that associated MIGS using OMNI with suppressed diurnal fluctuations in IOP, a clinically meaningful and independent risk factor for the progression of glaucoma. In that study, 95% of patients had a diminished peak IOP postoperatively when compared to preoperative measurements. And finally, earlier today, we announced FDA authorization to proceed with our Precision RCT under IDE. We designed this trial to evaluate the safety and effectiveness of OMNI for use in canaloplasty alone procedures. In Precision, we will compare results from combination cataract procedures in three trial arms. Canaloplasty alone using OMNI, canaloplasty followed by trabeculotomy using OMNI, and canal implants. We believe Precision will represent the largest prospective MIGS RCT ever initiated based on our target of 459 subjects receiving a MIGS procedure. We plan to use the results of Precision to support a premarket submission to the FDA, seeking clearance for an expanded indication for use of OMNI and canaloplasty alone procedures to reduce IOP in adult patients with POAG. If we are successful, surgeons would have additional flexibility to use OMNI to customize treatment and expand their preferred use case, particularly for milder cases. Additionally, we hope to share data from Precision with payers who are influential arbiters of patient access. CMS and other payers rely in part on review of relevant medical data published in peer-reviewed journals when making coverage and payment policy decisions. We believe our clinical trials will demonstrate clinically significant improvements in health and economic outcomes. Our market access team made significant progress securing coverage among private payers for OMNI procedures in recent months. We're pleased to report that the OMNI procedure is now covered and reimbursed by MACs and private payers representing an estimated 75% of all medical benefit covered lives. We are grateful for the support of the AAO and AGS who continue to support our efforts. We continue to make progress and look forward to providing further updates over the coming quarters. Last week, the Centers for Medicare and Medicaid Services issued a final rule that includes updates on policy changes for Medicare payments to physicians and facilities. These final rules will go into effect on January 1, 2022, subject to the issuance of any updates or corrections by CMS. Payments related to CPT Code 66174, which is used to report procedures performed with OMNI were among those that were revised. As a whole, we are quite pleased with the Medicare payment landscape that will bring modest increases in payment for canaloplasty and trabeculotomy in the ASC and HOPD settings from 2021 to 2022. Our preliminary assessment of the physician fee and facility fee payment rates remains the same as when the proposed rules came out in July as we were going public. We believe OMNI's professional fees will be in a better relative position in 2022 versus 2021, compared to its combination cataract implant competitors. Although the approximate professional payment for canaloplasty will decrease by $209 to $739, which was expected given the elegant procedural advancements made by the OMNI technology for this procedure, the focus of our discussions with physicians continues to center on the strength of our clinical data. Nonetheless, physician reimbursement for canaloplasty will remain significantly superior to reimbursements for both stand-alone cataract surgery as well as cataract surgery in combination with canal-based implants. In routine combination cataract procedures using OMNI, the approximate total physician fee will be $1,003 versus $664 for the new canal implant combination cataract code CPT-66991 and $529 for stand-alone routine cataract surgery CPT-66984. In complex combination cataract procedures using OMNI, the approximate physician fee will be $1,101 versus $833 for the new canal implant in combination with complex cataract code CPT-66989. Our near-term reimbursement objective is to continually improve the competitiveness of payments for procedures performed with OMNI. We believe the combination of one, OMNI's highly differentiated efficacy; two, the relative advantage of the 2022 physician fees and modest increase in facility fees for 66174; three, ongoing clinical feedback from OMNI users; and four, our demonstrated historical growth trajectory will allow us to continue to take share from the combo cataract canal implants and advance our leadership in the five times larger stand-alone segment. We are pleased that CPT code 66174 will realize a modest increase of about 2% in both the ASC setting, which accounts for over 80% of OMNI's US revenues, and the HOPD setting. Payments for canaloplasty will increase 2.5% to $1,919 in the ASC setting and 2.1% to $4,000 in the HOPD setting. In 2022, ASCs will receive over $850 more for a stand-alone OMNI procedure than for a stand-alone cataract procedure. For HOPDs, the difference for these same two procedures will exceed $1,800. In 2021, ASCs received $953 more for combination cataract procedures using canal implants and for combination cataract canaloplasty procedures. This gap will be reduced by $158 for 2022, and we will continue our efforts alongside the medical societies, patient advocacy groups, and the surgical community to seek more equitable reimbursement. We sought device-intensive status for CPT code 66174 in the ASC setting, which would have resulted in an increase in payments to ASCs. CMS declined to assign device-intensive designation for 66174 for 2022. We believe this decision is incorrect and stems from inaccurate hospital reporting of device costs for CPT-66174. We will continue to work with the medical societies, patient advocacy groups, CMS, and other ophthalmic stakeholders to help ensure the accuracy of the billing data that CMS will rely on when deciding whether CPT-66174 merits device-intensive status in the future. Our third value driver focuses on TearCare, which is currently marketed as our powered heating pad for the application of localized heat where the medical community recommends the application of a warm compress to the eyelids. We purposefully built TearCare to deliver a precise and tightly controlled level of penetrating thermal energy through the outer eyelids and into the meibomian glands on the posterior side of the eyelids in a comfortable office-based procedure. We introduced TearCare in a controlled launch two years ago with approximately 10 reps covering the United States. Our plan for 2022 includes modest expansion of our TearCare sales force to fill in high-value geographic white space our controlled launch team cannot fully cover. We are developing and seeking FDA clearance of an expanded indication for TearCare for the application of localized heat therapy in adult patients with evaporative dry eye disease due to meibomian gland dysfunction when used in conjunction with manual expression of meibomian glands. Dry eye is a multifactorial disease that is most commonly characterized by poor-quality tears that evaporate too quickly. Study data showed that 86% of dry eye cases are associated with meibomian gland dysfunction, yet the most common dry eye treatments used today address aqueous deficiency for inflammation and represent 95% of manufacturer revenues. None of the leading prescription eye drop medications are indicated for or have a mechanism targeting the most prevalent underlying cause of dry eye, meibomian gland dysfunction. To compound this issue, Medicare and commercial insurers have not established any meaningful reimbursement for MGD treatment. Dry eye is the number one reason for visits to an eye care provider, and we believe the US market for effective MGD treatment could exceed $10 billion annually. We are executing a very thoughtful and well-informed strategy to unlock the potential market for TearCare in its authorized indications by pioneering optimal patient access to effective MGD care through health insurance. We want to maximize the reach of our TearCare technology and intend to provide a comprehensive solution for the broadest range of MGD sufferers. As with our value drivers for surgical glaucoma, our dry eye strategic initiative also involves cross-functional support from our clinical, regulatory, market access, and commercial teams. On the regulatory front, we submitted a premarket notification to the FDA in September that we hope will result in clearance for an expanded indication for use of TearCare in the coming months. In parallel with our TearCare regulatory efforts, enrollment continues nicely in our second TearCare RCT, SAHARA, which will evaluate the efficacy of TearCare compared to a leading prescription dry eye medication and assess the durability of TearCare treatments over a 24-month period. Articles based on results from our first RCT, OLYMPIA, have been published in two leading peer-reviewed journals. In OLYMPIA, TearCare was compared to LipiFlow. Among the recent publications was an article in cornea, reporting that a single use of TearCare significantly alleviated the signs and symptoms of dry eye disease in patients with meibomian gland dysfunction. We expect data from OLYMPIA, SAHARA, and other studies will support several additional articles in peer-reviewed journals. I would like to conclude my remarks by addressing why we sued Ivantis. In brief, we sued to protect our investments in research and development and to protect the market share and margins of our products. My brother and co-founder, David, and I began developing breakthrough ophthalmology technologies over 15 years ago. In the years that followed, we have continuously invested in research and development. We incorporated many of these innovations in successful commercial products like OMNI and TearCare. Our continuing ability to grow Sight Sciences and invest in R&D depends on obtaining and enforcing intellectual property rights. Our investors deserve to realize value from our inventions. Where we see blatant encroachment on our intellectual property, we must vigorously defend our rights. We owe it to our patients, our company, and our shareholders to hold accountable competitors who seek to profit from our investment. We cannot sit idly by while a competitor uses our intellectual property to compete against our own products. I would also like to note that the patents asserted against Ivantis are not associated with OMNI. The four patents in suit relate to our implantable circumferential canal scaffolding intellectual property. The Hydrus Microstent competes directly with OMNI in the combination cataract segment. Our lawsuit seeks to enjoin Ivantis from its infringing competition. With that, I'll now turn the call over to Jesse to discuss our third quarter financial results.

Thank you, Paul. Our total revenue for the three months ending September 30, 2021, reached a record 13.1 million, reflecting a 51% increase from the 8.7 million in the same period of 2020, and a 5% increase from 12.5 million in the second quarter of 2021, despite this typically being a seasonally weaker quarter in our industry. Our combined gross margin for the third quarter was 84%, compared to 70% in the same period last year and 82% in the second quarter of 2021. Revenue from our surgical glaucoma segment for the third quarter hit a record $12.4 million, up 58% from 7.9 million in the third quarter of 2020 and a 4% sequential increase from 12 million in the second quarter of 2021. While we believe that COVID continues to influence how all companies operate, its impact on our commercial opportunities remained largely unchanged since our last update in August. Additionally, we did not see any boost during the quarter from increased OMNI trialing due to the proposed rate changes at CMS announced in July. We trained slightly more surgeons in the third quarter than in the second quarter, indicating ongoing long-term growth rather than a temporary spike. Instead of realizing a one-time growth benefit, we believe many customers postponed OMNI trainings to manage their canal implant inventory, driven by concerns that reimbursement for canal implants might significantly decrease after year-end. Our results highlight our consistent commercial execution. As Paul noted, we have established a standard of steady, market-leading growth in a rapidly evolving MIGS market, continuously gaining dollar and volume share. More specifically, our surgical glaucoma sales benefited from an increase in new accounts, supported by a selling environment that was more aligned with normalized commercial access to customer facilities than what we experienced last year, along with an increase in utilization per active account. The quarter’s results faced challenges from seasonal factors, including surgeon vacations and heightened COVID-related impacts associated with the Delta variant in July. Gross margin in surgical glaucoma was 87% in the third quarter, up from 75% in the prior-year period and 85% in the second quarter. The sequential improvement was mainly due to transitioning our production to a low-cost, high-volume manufacturer in the first half of the year. For our dry eye segment, revenues were $700,000 in the third quarter of 2021. Although this represents a decrease from the $800,000 in the same quarter last year, we believe we improved revenue quality by focusing more on specialized dry eye accounts, which is vital for our long-term strategy in market access for MGD. We recognize that this strategy may not align with the public market valuation environment primarily driven by revenue, but we firmly believe in TearCare's long-term value and this approach to maximizing value. Since the fourth quarter of 2020, we redirected our sales focus towards accounts aligning with our long-term goals for better MGD patient care access, anticipating that this could negatively impact short-term results as our team adapted before establishing strategic long-term growth. To illustrate the effectiveness of our efforts, following an initial sales decline in the fourth quarter of 2020, our dry eye sales have sequentially grown by 37% per quarter, with revenues now 2.4 times higher than in the fourth quarter of 2020 when this initiative began. Our market access-driven strategy has effectively improved our targeting of new customers to align with TearCare's value proposition. The 20% sequential growth in the third quarter was bolstered by an increasing number of new facilities sold compared to the second quarter and a larger base of reordering customers. Gross margin in dry eye was 33% in the quarter, up from 12% in the third quarter of 2020 and 3% in the second quarter of 2021. Dry eye gross margins may remain volatile until we consciously scale the business, at which point we expect to achieve margins similar to those in the surgical glaucoma sector. Operating expenses for the third quarter of 2021 totaled $25.1 million, an 87% increase from $13.4 million in the same quarter of 2020 and an 18% increase from $21.3 million in the second quarter of 2021. Of these operating expenses, noncash stock-based compensation accounted for $1.9 million compared to $200,000 in the prior year and $900,000 in the second quarter of 2021. SG&A expenses for the quarter were $20.8 million, compared to $11.2 million in the third quarter of 2020 and $17.8 million in the second quarter of 2021. The increase in SG&A was primarily due to our ongoing investments in scaling operations and increasing corporate headcount to support our growth. As part of our planning for 2022, we identified opportunities to expand our team and accelerate growth further. We will continue to significantly invest in our corporate systems and personnel to effectively capitalize on our extensive opportunities to improve patients' lives. R&D expenses for the quarter were $4.3 million, compared to $2.2 million in the third quarter of 2020 and $3.5 million in the second quarter of 2021. The majority of the increase in R&D expenses from 2020 to 2021 resulted from three factors: heightened personnel expenses as we expand our clinical, regulatory, and R&D teams; costs for contract manufacturing lab supplies and prototype development; and expenses associated with clinical studies. We expect our R&D expenses to continue rising in the near term as we implement our clinical roadmap and enhance our internal R&D capabilities. The loss from operations for the three months ended September 30, 2021, was $14 million, compared to a loss of $7.4 million for the same period in 2020 and a loss of $11.1 million in the second quarter of 2021. In this quarter, we recognized other expenses of $2 million, up from $200,000 in the prior-year period, due to a final fair value remeasurement of previously exercised preferred stock following our IPO. This will not be a recurring expense considering our changed capital structure post-IPO. We reported a net loss of $17.2 million or $0.43 per share for the third quarter of 2021, based on a weighted average post-IPO share count of 39.8 million shares, compared to a net loss of $8.1 million or $0.85 per share in the third quarter of 2020 based on a weighted average pre-IPO share count of 9.5 million shares. We concluded the quarter with $271.5 million in cash and equivalents and $32.5 million in long-term debt. As a reminder, we completed our initial public offering in mid-July, generating net proceeds of approximately $252.2 million. Looking ahead, we are updating our full-year revenue guidance to a range of $47.5 million to $48.5 million, indicating an approximate 74% growth over 2020 at the midpoint. This guidance reflects the continuation of growth trends observed in recent quarters and takes into account robust growth fundamentals while considering seasonal patterns, including fewer selling days in the remaining weeks of 2021 due to holidays and vacations. We presuppose that the operating environment we experienced in the third quarter of 2021 and thus far in the fourth quarter remains consistent through year-end. Now, I will turn the call back over to Paul for closing remarks.

Thank you, Jesse. I hope we've made it very clear how our fundamental commitment to delivering the power of Sight to patients with eye disease informs every decision we make. We believe we are one of the very few companies in the medical device sector with the demonstrated capabilities to both innovate disruptively and commercialize with excellence. We strive to operate at an entirely different level, and that was on display this past quarter where we rose to the occasion, excelled on all fronts, and set commercial records across the board. Jesse and I will now be joined by Shawn O'Neil, our Chief Commercial Officer, to answer your questions. Operator, please open up the call for questions.

Our first question comes from Ms. Cecilia Furlong from Morgan Stanley.

I wanted to start with the account growth that you highlighted in the quarter for OMNI. If you could just walk through kind of what you saw both from a headwind standpoint, anything due to COVID seasonality, but then also how you are able to open the accounts to where the trajectory you saw and as you look into 4Q as well kind of the roadmap you see there for further account opening.

Cecilia, it's Jesse. I'll respond to that. We had a very strong quarter, consistent with the second quarter regarding new account openings and trial activities. Our retention metrics are also very strong. However, I want to clarify that our growth is not just a one-time occurrence influenced by fluctuations in the reimbursement market. It aligns well with the trajectory we've sustained throughout the year. COVID has now become a fundamental part of our operations and our customers' operations. We have the chance to continue selling and growing, and we are making the most of that opportunity, which is reflected in our results.

Yes, Cecilia. This is Shawn. I would add that our trajectory and confidence are driven by our commitment to providing an exceptional customer experience across both businesses, OMNI and TearCare. It really comes down to the care and training of the surgeons, doctors, and staff to ensure positive outcomes for them as well as for their patients. This focus continues to grow our confidence in increased utilization, particularly for OMNI in the stand-alone market, as Paul mentioned in his comments.

And I guess, I wanted to ask just in terms of 4Q guidance, what you're factoring in, both from a reimbursement now that everything has been finalized. But any potential benefits from that as you think about 4Q, just ahead of '22 implementation, backlog impact, COVID pressures. Just any other dynamics you would call out as well as what you expect with the new label to be able to see just from the stand-alone opportunity and continuing to drive that.

Yes. I'll start and then Paul and Shawn can add their thoughts. The guidance is based on maintaining the growth metrics we've been seeing, particularly in the surgical glaucoma sector. It reflects the current operating environment without any assumptions about competitive responses to changes in 2022. We believe these changes will be advantageous for us. However, the rates from 2021 remain active, and our guidance essentially represents a continuation of the results we have reported along with the key performance indicators we monitor closely.

I want to emphasize that our outlook has always been very strong leading up to and through our IPO, which coincided with the proposed rule. The proposed and final rule have improved our competitive position, particularly regarding the professional fee for our 66174 surgeon fee, which has increased relative to canal implant injection fees based on a comprehensive survey of nearly a hundred ophthalmic surgeons. The survey showed a premium on 66174, which we anticipated since our surgeons perform more complex, skillful procedures that enhance the consistency and effectiveness of IOP-lowering for patients. On the facility fee side, we were pleased to see the disadvantage of our 66174 facility fee reduced. The cataract stents have traditionally held an advantage in this area, but that gap has narrowed in the final rule. Overall, we are better positioned in 2022 compared to 2021 against our cataract stent competitors. Our outlook for commercial scale and growth has been strengthened as we enter 2022, building on the OMNI growth we experienced throughout 2021, despite the CMS changes to 66174. Lastly, it's essential to recognize that while there are many comparisons between us and the combo cataract stent competition, our main focus and growth market at Sight is the substantially larger stand-alone market, where we are leading the way. In this stand-alone context, the 66174 professional fee and facility fee outlined in the final rule are very competitive compared to cataract surgery alone, both in terms of professional fees and ASC fees. We are optimistic about our prospects in both the combo cataract segment and the much larger stand-alone segment.

Cecilia, this is Shawn. I would add on to your question around the label. The label continues to be a positive for us as well with the expanded label for OMNI and the breadth of the adult patients with primary open-angle glaucoma and IOP lowering that really is going to be the cornerstone of our market-leading disease state education campaign as well as where we're going to be investing resources to educate the primary eye care provider. So we are definitely leveraging that expanded label to educate the community on the stand-alone and continue to pioneer and create leadership role in the stand-alone space.

Our next question comes from the line of Mr. Matt O'Brien from Piper Sandler.

I guess just a follow-up on what Cecilia was asking as far as new accounts go. Can you kind of frame up what you saw in terms of training competitive clinicians versus kind of those new to MIGS? And then what did you see in Q3 as far as stand-alone sales versus combo cataract?

This is Shawn. Yes. So as far as the training of new surgeons, we continue to focus on the high-volume MIGS surgeons. There's a bolus of our trained universe. As we continue to penetrate into those roughly 3,000 MIGS-trained comprehensive surgeons in the United States, so we've definitely seen as we continue to penetrate into that group because they are the ones that are already well informed on the anatomy and angle surgery, and we're gaining confidence with them in that combo space, ultimately leading into our expansion in the stand-alone space. I know that we are getting some additional data, CPT level data, to really quantify our penetration of the stand-alone space. As we've mentioned before, we do have internal information that shows that we are growing in that space based on our training and conversations with surgeons and we look forward to providing more detailed information in the future as we get that additional data.

Sorry. Go ahead, Paul.

We aim to gather detailed data to report quarterly on our progress in market development. Currently, we have conducted some initial analyses for CPT-66174, which was launched in 2018. In that year, there were about 11,800 claims for the stand-alone use of CPT-66174. This number doubled to just over 26,900 claims in 2019, the second year after the OMNI launch. In 2020, even with the COVID pandemic affecting non-life-threatening surgical procedures, claims for stand-alone use of 66174 increased further, reaching over 30,000. We have tasked our market access team with obtaining even more detailed data, and we expect to have nearly current quarterly data available soon. We look forward to sharing updates on the stand-alone growth of 66174 in the near future as we acquire this information.

I’m not sure if this is directed at Paul or Jesse. As we consider the fourth quarter, it's looking better compared to Q3, and it seems you faced some challenges in Q3. The guidance shows a small improvement, though it's not a significant increase compared to Q3, which tends to be a weaker quarter. So why isn't the guidance for Q4 higher? What I'm trying to understand is that if you annualize Q4, it appears you need a lot of growth to reach the expectations for 2022. I recognize that new representatives are coming onboard, but what gives you the confidence or what can you share that should reassure us about meeting these ambitious 2022 targets?

Matt, I suggest considering the quarterly dollar growth implied by the guidance for 2021 compared to how we ended 2020. With all the factors and momentum in the business, does it indicate an increase in the growth trajectory as we approach the 2022 figures? When we created our forecast, we expected to finish the year stronger than initially anticipated, supporting our projections confidently. We believe we will end the year in a strong position. The first half of the year is showing solid growth patterns, similar to our past experiences in this market. However, December may present some challenges due to vacations and reduced selling opportunities in the latter half of the month. Nevertheless, we feel that the guidance we provided suggests a substantial sequential growth for a surgical eye care business, particularly when considering the comparisons from the third quarter.

Our last question comes from the line of Joanne Wuensch from Citi.

This is Anthony on for Joanne. Thank you all for squeezing us in here. I just have one question, and it's a bit more open-ended. What surprised you the most and the least over the past three months, especially just given all the reimbursement price? Thanks for taking the question.

Sorry, could you repeat that? What surprised us the most or what surprised?

Yes. Sorry if I was breaking up. I just asked what surprised you the most and the least over the past three months?

I’m not sure. We’ve been executing according to our fundamentals across our three value drivers in a very consistent manner, as demonstrated by our strong performance this quarter. We’ve been focused on continuing to capture market share in combo cataract, expanding its use in stand-alone applications, and advancing all of our TearCare initiatives. I believe we have achieved that in a very predictable and impressive manner. I don’t reflect on the last quarter and see many surprises. I apologize if that’s not an exciting answer, but Shawn or Jesse, perhaps you were surprised by something.

I agree, Paul. This is Shawn. While it's not surprising, we have truly appreciated the strong support from our customers and the acceptance of both OMNI and TearCare technologies in our strategies for developing the mild to moderate stand-alone market with OMNI and improving patient access with TearCare and MGD. The advocacy we received from our customer base regarding these technologies and our go-to-market strategy has been a significant highlight for us and continues to boost our confidence as we progress in both markets.

My answer quickly is I was surprised about how strong our results were relative to peers and competitors that have also reported results.

We have a question from the line of Matt O'Brien from Piper Sandler.

Just two quick follow-ups. There was some consolidation in this space earlier this week. I'm just curious as far as how you think about that consolidation and the impact of the business in '22? And then there's also a little bit more competition on the canaloplasty side that was recently approved. And I'm just curious as far as your thoughts as far as if that would be a headwind for you guys? Or if it's just it maybe opens up the market just because there is so much opportunity in that category?

Yes. I'll address that, Matt. This is Paul. In terms of consolidation, I believe you are referring to Alcon's acquisition of Ivantis. Two key points come to mind. First, the stents, whether Hydrus or iStent, are products used alongside cataract surgery, and we have already shown our ability to capture market share effectively. That segment represents one-fifth of the market. However, we are focusing on and effectively penetrating a much larger stand-alone market. So, we are not impacted there. Additionally, we have Shawn on the line. Having spent over 20 years at Alcon, he is outstanding commercially and has developed a top-tier commercial leadership team throughout the organization. Therefore, regarding our ability to compete and succeed, our confidence increases daily. Shawn, would you like to add anything to that?

Yes. Absolutely, Paul. We obviously anticipate Alcon's presence to meet additional investment and just recognition of the importance of the MIGS space for patient care. But I think that additional investment in education awareness is overall positive for the marketplace. And because of the performance of OMNI to date and our confidence in this differentiated efficacy profile and with a broad indication for use that we have to enter into a stand-alone MIGS market, we're still really confident in our ability to lead that stand-alone MIGS market and continue to leverage our top commercial talent that we have here and continue to invest and expand here at Sight Sciences to meet our strategic objectives. So, I think overall, it's a positive. And frankly, those are the same things that are going to allow us to compete regardless of what competitor comes into the marketplace is going to continue to be focusing on our points of differentiation of OMNI's ability to address all three points of resistance for those mild to moderate, either in combination with cataracts and most definitely in the stand-alone space and just continue to leverage that in our exceptional customer experience to continue to build our leadership position in stand-alone.

Regarding your question about potential entrants in canaloplasty, there are a few key points to consider. First, our research and development efforts have made us pioneers in ab interno canaloplasty and trabeculotomy. Our clinical excellence with the OMNI device stems from years of experience, tens of thousands of cases, and valuable clinician feedback. It has taken considerable time to develop a device that provides outstanding results for both surgeons and their patients. While creating a prototype and obtaining clearance might seem easy, producing a reliable and consistent canaloplasty device that enables surgeons to navigate delicate canals effectively is quite challenging. On the clinical side, I have not seen any data from other entrants in ab interno canaloplasty. For us to discuss canaloplasty products, clinical data is essential. This brings me to the regulatory aspect. I urge any companies or products under discussion to clarify their indication for use: whether it pertains to canaloplasty, pressure lowering, or primary open-angle glaucoma. The pathway we've pursued necessitates substantial clinical data to gain an indication for canaloplasty. We recently announced our IDE for a canaloplasty-only indication, supported by our MIGS trial involving 459 patients, which is likely the largest trial of its kind. Lastly, while I am not familiar with other devices, we have been operating in this field for over a decade and possess extensive intellectual property covering methods and devices for circumferential canalicular glaucoma surgery. These points should be considered when evaluating any potential competitors.

This concludes our question-and-answer session. I would like to turn the call back to Paul Badawi for closing remarks.

Just want to say thank you all for your time, attention, and interest in Sight Sciences.

This concludes today’s conference call. You may now disconnect.